Atlanta office market sees its fifth consecutive quarter of negative absorption in 4Q 2009
January 7, 2009
Closing numbers for the office market’s first decade of this century were not favorable with 1,170,120 square feet of negative absorption for 2009 and 400,456 square feet of negative absorption for the fourth quarter. Due to space deliveries of 1,888,461 square feet and the negative absorption in 2009, vacant space increased from year-end 2008 at 16.44 percent vacant to 18.41 percent vacant at year-end 2009. Average rental rates also have declined somewhat, despite the fact that a number of new and expensive buildings were brought into the market. Average rental rates decreased from the fourth quarter of 2008 at $21.69 to $21.47 per square foot at year-end 2009.
The urban corridor continued to outperform the suburbs in 2009 with only 8,649 square feet of negative absorption, compared to the suburbs at 1,161,471 square feet of negative absorption. The urban corridor currently stands at 80.58 percent occupied, compared to 82.11 percent in the suburbs, primarily due to the tremendous amount of unabsorbed new development along the urban corridor. For calendar year 2009, the urban corridor delivered 1,599,369 square feet in three locations, as compared to the suburbs which also delivered three buildings totaling only 289,092 square feet.
Downtown, which has not had any new deliveries since 2007, currently has the highest occupancy rate along the urban corridor at 82.25 percent and also the lowest average rental rate of the urban submarkets at $21.92 per square foot, as compared to Midtown at $25.93 per square foot and Buckhead at $26.06 per square foot. The urban corridor commands much higher average rental rates at $24.48 per square foot, compared to the suburbs at $19.91 per square foot.
The outlook for 2010 and going forward is optimistic for Atlanta, still one of the fastest growing cities in the country. Only three new buildings are under construction in metro Atlanta, all along the urban corridor: 3630 Peachtree Road, Phipps Tower, and 12th and Midtown, which all deliver in 2010 and total 1,647,304 square feet. We do not expect new office development in Atlanta for at least the next five years unless there is a major pre-leased build-to-suit, and even this requirement could be difficult to finance.
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